FOCUS: China’s new steel scrap standards ‘will pave way for imports’

Market participants in China are increasingly confident that Chinese authorities will revive steel scrap imports into the country in 2021 following the release of new domestic scrap classification standards.

A draft of the new standards for ferrous and stainless scrap for China’s domestic market was released late last month. Market participants expect these standards to be launched and implemented by the end of this year.

This is expected to make the restart of significant volumes of steel scrap imports to China easier because the new classifications are designed to be close to international standards.

Simpler classification
The new standards divide ferrous scrap into five grades, namely heavy recycled steel materials, medium heavy recycled steel materials, small recycled steel materials, shredded recycled steel materials and bundled recycled steel materials.

Standards also list stainless recycled steel materials as one grade, according to the draft released by China’s State Administration for Market Regulation in late October.

New specifications are listed as follows:

Heavy recycled steel materials
solid body with minimum thickness = 6mm or minimum diameter = 10mm
length < 1,500mm
width < 600mm
maximum unit weight = 1,500kg

Medium heavy recycled steel materials
solid body with minimum thickness = 4mm or minimum diameter = 8mm
length < 1,500mm
width < 600mm
maximum unit weight = 1,500kg

Small recycled steel materials
minimum thickness = 2mm
length < 1,500mm
width < 600mm
maximum unit weight = 1,500kg

Shredded recycled steel materials
bulk density 0.8-1.8 tonnes per square meter

Bundled recycled steel materials
maximum length = 1,500mm
maximum width = 1,000mm
maximum height = 1,000mm
maximum unit weight = 2,000kg

Stainless recycling steel materials
maximum length = 1,500mm
maximum width = 1,000mm
thickness = 300-700mm
maximum unit weight = 1,500kg

Market reaction
“The classifications will facilitate scrap trading around the country, compared with [the] previous dozens of grades implemented by mills in different regions,” a trader in eastern China said.

“Grades listed in the new standards are closer to international standards, which will make imports easier when they restart,” a second trader in the region said.

For instance, the “heavy recycled steel materials” category expands the length requirement to an internationally accepted 1,500mm from the previous 1,000mm, he said.

Market participants expect that, after the implementation of the new standards domestically, Chinese authorities will move on toward finalizing standards for scrap imports.

But any final say on the reboot of steel scrap imports to the country must be signed off by a number of different Chinese state departments, including the General Administration of Customs, and it may take a while for the new rules to be implemented.

“I think by the end of 2020, the new import scrap policy may be approved and by the middle of 2021, China may start importing,” a third Chinese trader said.

A Japanese scrap trader told Fastmarkets that little is known about what grades of scrap will be allowed for import into China. A particularly large question mark hangs over the import of H2 heavy scrap or heavy melting scrap due to the higher levels of dust and dirt typically found in these grades, he said.

Some Chinese traders are also looking for reliable suppliers from abroad, and they thought HMS and shredded scrap – the most popular grades consumed by Chinese steelmakers – will be at the top of mills’ shopping list.

Strict requirements
The new domestic standards require all ferrous scrap to be processed before they are put into furnaces. Mills are not allowed to consume raw scrap.

In the category of recycled steel materials, the content of phosphorus and sulfur is no higher than 0.050%; the content of copper is no higher than 0.300%, and the content of arsenic is no higher than 0.050%.

In the recycled stainless steel materials category, the content of nickel is no lower than 6% and chromium is no lower than 10%. Hazardous materials content should not be over 0.01%.

Carried-waste with environmental influence is no higher than 0.3% and those without environmental influence is no higher than 1.5%.

“If the same requirements are applied on scrap imports, no raw scrap will be brought into China,” a fourth trader in eastern China said.

Attractive price gap

Fastmarkets’ weekly assessment for steel scrap heavy scrap domestic, delivered mill China was at 2,740-2,810 yuan ($410-420) per tonne on October 30, up by 40-100 yuan per tonne from a week earlier.

These are equivalent to about $361-370 per tonne delivered to mills, excluding a 13% value added tax.

Domestic scrap prices in China are much higher than those in nearby import markets.

For example, Fastmarkets’ weekly assessment for steel scrap HMS 1&2 (80:20), cfr Vietnam was $315 per tonne on October 30, compared with $310-315 per tonne a week earlier.

If import rules are relaxed, China is unlikely to impose an import duty on the secondary steelmaking raw material because mills need competitively priced scrap to lower their production costs, an industry analyst in Shanghai said.

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